The subdued office rental market hit Swire Pacific’s property unit Swire Properties, where underlying profit fell 8 per cent year on year to HK$3.57 billion. Meanwhile, sluggish homes sales did the most damage to Wharf, as residential-segment revenue in mainland China fell by 25 per cent to HK$2.5 billion.
Swire Properties, one of Hong Kong’s largest commercial landlords, cited “oversupply and weak demand” as twin challenges besetting the city.
“Amid an uncertain economic landscape, [corporations] are exercising caution in their real estate decisions,” said Guy Bradley, Swire Pacific chairman.
Excluding the developer’s newest buildings, the office portfolio was 93 per cent occupied, Blackburn added. Two Taikoo Place, completed in September 2022 is 62 per cent leased, and Six Pacific Place, finished in February 2024, is at 44 per cent occupancy, he said.
“With continued new office supplies coming to the market, coupled with weak demand, office rental remained under pressure,” Blackburn said. “Despite these challenges, our office portfolio has remained resilient.”
“In the second half of 2024, we will continue to build on our strengths,” Bradley said. “Our businesses are well-positioned to cope with any immediate adversity and economic challenges, and our long-term focus on investing in our core markets remains unchanged.”
“A gradual improvement in sentiment” towards the end of the year is expected if interest rates are reduced in September, Blackburn said at a media briefing.
However, “recovery in the Hong Kong office market is going to take take some time based on current vacancy rates and new supply”, he added.
At Wharf, overall office property revenue declined by 4 per cent to HK$2.32 billion and hotel revenue slipped 2 per cent to HK$291 million in the first half. Logistics revenue fell 12 per cent to HK$1.07 billion due to “lower throughput in Hong Kong and unfavourable business mix in mainland China”, the company said in a filing.
Mainland office occupancy was depressed owing to “defection to lower grade properties as well as business downsizing and/or closure”, the company said. Rents were also soft, it added.
“The business outlook remains clouded by economic uncertainties and volatility,” Wharf said, citing US interest rates, global trade and geopolitical risks, and, in China, high leverage and inventory in the property sector, subdued consumer sentiment and an elevated savings rate.
“In Hong Kong, the strong local currency and tight financial conditions are hindering the economic recovery. The group will remain prudent in financial management and seize opportunities to drive business performance amid economic headwinds.”